36 INDUSTRIAL DISTRIBUTION / May/June 2014 www.inddist.com
BY ANNA WELLS
Defining to a customer the full impact of working with a value-added reseller has always been a challenge
for distributors. In today’s environment,
where long-standing industrial suppliers
are competing with new and flashy e-commerce sites like AmazonSupply – who
can afford to sell on the kind of margins
that aren’t sustainable for much of their
competition – it’s all the more critical to
be able to articulate the value of technical
expertise and service offerings.

This may be why the respondents to our
survey continue to minimize the importance of price. While they were permitted
to check all that apply, only 44 percent
said price was one of the primary reasons a
customer does business with them (Figure

1). The number one reason, according
to our survey respondents, in once again
“Relationships,” but for not quite as many.

Of last year’s group, more than 91 percent
said this was a primary reason, compared
to just under 85 percent today. Other top
categories – in a tie for second place – are
“Product Availability” and “Technical
Support.” Joining price on the lower priority end of the scale are things like 24/7
support, vendor managed inventory, and
engineering capabilities.

Write-in reasons consistently alluded to
quality, with some even mentioning that
their American-made product lines made
customers do business with them. For others, things like global reach combined with
local service were a competitive advantage. One respondent took the opportunity to emphasize the service component of
his/her business, saying: “Service, service,
service — in all aspects you have shown. If

of Respondents

0 20 40 60 80 100

Other

Relationships

Engineering capabilities
Vendor managed inventory

24/7 support
Price
Delivery time

Technical support
Product availability 71.8

71.8

61.8

43. 3

30. 3

23. 5

31.1

84.5

5.0

Which do you feel are the primary reasons your customersdo business with you?

Figure 1

we don’t have it, we’re on the run.”Mainly, the results in Figure 1 are similarto those in years past, but it will be inter-esting to see whether relationships as abusiness priority are truly on the decline,or if this year’s dip is just that — a statis-tical drop that will simply even out in thefuture.

And while vendor managed inventory
(VMI) ranked relatively low on the list of
priorities, over 51 percent of respondents
tell us they’re involved with VMI programs.

It’s possible the value add for a VMI use ismore evident to manufacturer-suppliers, asit allows these businesses to better predictdemand and manage inventory and stock-ing. Of course, the trickle-down effect tothe distributor’s customer is improved abili-ty to meet turnaround times and reducedstockouts. VMI also has benefits for thedistributor, as it reduces their risk and theirneed to tie up capital with inventory.

Another valuable internal objective
for many distributors has been to utilize
the buying power and scale of a co-op or
buying group. Nineteen percent of those
surveyed are only buying group members,
and five percent participate in a co-op
only; ten percent are involved in both
simultaneously. Cumulatively speaking,

44 percent are involved in one, the other,
or both, which is slightly higher than last
year’s group of 42 percent. Many smaller,
independent distributors find value in